Finnish earnings-related pension provider Varma has committed €2.3bn to a tailored exchange-traded fund (ETF), making it the largest ETF investment of its kind in the world.

The new climate-impacting ETF provided by Invesco was listed on the New York Stock Exchange on 12 December 2024, supporting Varma's renewed environmental policy.

The fund, tailored for Varma, invests in global companies that meet certain environmental and climate criteria. The companies in the fund have a track record of reducing carbon dioxide emissions and environmental responsibility.

Varma head of listed investments, Timo Sallinen, commented: “We wanted a cost-effective fund tailored to our climate goals and operating in the US market.

“The investment serves well the objectives of our investment strategy, which are related to responsible investment and geographical diversification of investments.

“This is a liquid instrument and gives us flexibility when investing our assets totalling approximately €63bn.”

ETFs are passive funds and Varma’s new ETF follows the MSCI Global Climate 500 North America Selection Index, which includes companies that represent the best in their industry, taking climate perspectives into account.

Varma also said ETFs are a cost-effective way for institutional investors to invest funds to meet specific goals in an investment strategy.

It added that since the ETF has been listed on an exchange the liquidity of the fund was good meaning that trading or selling the fund has been fast. In ETFs, assets are widely diversified.

The launch was carried out by Invesco, which acted as Varma's asset management partner in previous investments. In June, Varma invested €1.5bn in Invesco to implement an ETF climate fund.

Sallinen added that Varma was “very pleased” with the cooperation with Invesco, calling this fund investment a continuation of its previous investments in exchange-traded ETFs.

Varma has also made other investments in climate-impacted ETFs tailored to the fund, which operates in Japan, Europe, and emerging markets. The investment is related to Varma's climate targets.

Varma is the only Finnish pension insurance company that sets climate targets in line with the international climate initiative (Science-Based Target Initiative).

---